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Promissory Note Template
A promissory note is an unconditional written promise by one person to pay a fixed sum of money to another, and is the simplest enforceable debt document in Canadian law. Our free Canadian template is drafted to satisfy section 176 of the Bills of Exchange Act and the federal Interest Act so the note can be sued on without argument.
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PROMISSORY NOTE
Province Of Ontario, Canada — Bills Of Exchange Act
LENDER (PAYEE)
Sarah J. Thompson
123 Bay Street, Suite 800, Toronto, ON M5J 2T3
Phone: +1 (416) 555-0100
Email: sarah.thompson@email.com
Phone: +1 (416) 555-0100
Email: sarah.thompson@email.com
BORROWER (MAKER)
David R. Chen
456 Granville Street, Unit 12, Vancouver, BC V6C 1T2
Phone: +1 (604) 555-0200
Email: david.chen@email.com
Phone: +1 (604) 555-0200
Email: david.chen@email.com
Principal: 25,000.00 CAD
5.5% (Simple) · Unsecured · Term
FOR VALUE RECEIVED, David R. Chen (the "Borrower" or "Maker") promises to pay to the order of Sarah J. Thompson (the "Lender" or "Payee") the principal sum of 25,000.00 CAD, together with interest as described herein, in lawful money of Canada. This Promissory Note is a negotiable instrument issued pursuant to the Bills of Exchange Act, R.S.C. 1985, c. B-4.
1.
PRINCIPAL AND INTEREST
The Borrower shall pay to the Lender the principal sum of 25,000.00 CAD. Interest shall accrue on the outstanding principal balance at the rate of 5.5% per annum, calculated on a simple interest basis. Interest shall be computed on the basis of a 365-day year and the actual number of days elapsed.
2.
LOAN DATE AND MATURITY
This Promissory Note is made effective as of March 1, 2026 (the "Loan Date"). The entire outstanding principal balance, together with all accrued and unpaid interest, shall be due and payable in full on March 1, 2028 (the "Maturity Date").
3.
UNSECURED OBLIGATION
This Promissory Note is an unsecured obligation of the Borrower. No collateral or security has been pledged in connection with this Note. The Lender's sole recourse shall be against the personal assets of the Borrower and the Co-Signer named below.
4.
REPAYMENT SCHEDULE
The Borrower shall make monthly payments of 1,100.00 CAD each, commencing on April 1, 2026 and continuing on the same day of each subsequent month until the Maturity Date, at which time all remaining principal and accrued interest shall be due and payable in full.
5.
PREPAYMENT
The Borrower may prepay this Note in whole or in part at any time without premium or penalty. Any prepayment shall be applied first to accrued and unpaid interest and then to the outstanding principal balance.
6.
DEFAULT AND LATE FEES
The Borrower shall be in default under this Note if: (a) the Borrower fails to make any payment when due and such failure continues for a period of 10 days after the due date; (b) the Borrower becomes insolvent, makes an assignment for the benefit of creditors, or becomes subject to proceedings under the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3; or (c) any representation made by the Borrower in connection with this Note proves to have been materially false or misleading. Upon any late payment, the Borrower shall pay a late charge of 5% of the overdue amount, provided that, when aggregated with all interest and other charges, the effective annual rate shall not exceed the criminal rate set out in section 347 of the Criminal Code.
7.
ACCELERATION
Upon the occurrence of any event of default, the Lender may, at the Lender's sole option, declare the entire outstanding principal balance, together with all accrued and unpaid interest, immediately due and payable without further notice or demand. The Lender's failure to exercise this right upon any default shall not constitute a waiver of the right to exercise it upon any subsequent default.
8.
COLLECTION COSTS
In the event of default, the Borrower shall pay all reasonable costs and expenses incurred by the Lender in collecting or attempting to collect amounts owing under this Note, including legal fees and disbursements on a substantial indemnity basis, court costs, enforcement costs, and other out-of-pocket expenses. This obligation shall survive repayment of this Note.
9.
CO-SIGNER GUARANTEE
Emily R. Chen, of 456 Granville Street, Unit 12, Vancouver, BC V6C 1T2, (the "Co-Signer") unconditionally and irrevocably guarantees to the Lender the full and punctual payment of all principal, interest, late charges, and other amounts owing by the Borrower under this Note. The Co-Signer's liability is as a principal debtor, not merely as a surety; the Lender may proceed against the Co-Signer directly without first demanding payment from or pursuing remedies against the Borrower. The Co-Signer's liability is not released by any indulgence, extension of time, variation, or partial release granted by the Lender to the Borrower, and continues until all amounts under this Note are paid in full.
10.
CRIMINAL RATE COMPLIANCE
The total cost of borrowing under this Note — including all interest, fees, and charges — shall not exceed the criminal rate of interest in section 347 of the Criminal Code, R.S.C. 1985, c. C-46, as amended by the Budget Implementation Act, 2023, No. 1 (Bill C-47, royal assent 22 June 2023) and the Criminal Interest Rate Regulations, in force 1 January 2025. As of that date, the criminal rate is an annual percentage rate (APR) of thirty-five percent (35%) for consumer credit agreements and loans of $10,000.00 CAD or less; commercial loans between $10,000.00 and $500,000.00 CAD remain subject to the legacy 48% APR cap; commercial loans exceeding $500,000.00 CAD and certain pawnbroker / payday-loan products are exempt from the cap. Because the principal is between $10,000.00 and $500,000.00 CAD, this commercial-loan band remains subject to the legacy 48% APR cap pending further regulation. If the rate under this Note is found to exceed the applicable criminal rate, it shall automatically be reduced to the maximum lawful rate. Offering or advertising credit at a criminal rate is also an offence under section 347 as amended.
11.
GOVERNING LAW
This Promissory Note shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein, including the Bills of Exchange Act, R.S.C. 1985, c. B-4, and the Interest Act, R.S.C. 1985, c. I-15. The parties hereby attorn to the exclusive jurisdiction of the courts of the Province of Ontario.
12.
GENERAL PROVISIONS
Waiver: No waiver by the Lender of any default shall operate as a waiver of any other default or the same default on a future occasion. Demand and Notice: The Borrower waives presentment for payment, notice of dishonour, protest, and notice of protest in connection with this Note, except where notice is required by applicable consumer-protection legislation. Severability: If any provision of this Note is held unenforceable, the remaining provisions shall continue in full force and effect. Successors and Assigns: This Note shall be binding upon and inure to the benefit of the parties and their respective heirs, executors, administrators, successors, and permitted assigns. Negotiability: The Lender may transfer or negotiate this Note as a holder in due course under the Bills of Exchange Act. Amendment: This Note may not be amended except by written agreement signed by both parties. Notice: Any notice shall be in writing and delivered personally, by prepaid registered mail, or by email to the addresses specified above.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date indicated.
LENDER (PAYEE)
Sarah J. Thompson
Date: ____________________
BORROWER (MAKER)
David R. Chen
Date: ____________________
CO-SIGNER
Emily R. Chen
Date: ____________________
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What Is a Promissory Note?
A promissory note is a negotiable instrument in which one party (the maker) unconditionally promises in writing to pay a specified sum of money to another party (the payee) on demand or at a fixed future date. It is defined in section 176 of the federal Bills of Exchange Act, R.S.C. 1985, c. B-4, which governs promissory notes, cheques and bills of exchange uniformly across Canada.
Unlike a full loan agreement, which may run to many pages and include complex covenants, a promissory note is intentionally short and self-contained. It is especially common for family loans, private business advances, shareholder loans and vendor take-back financing. The note can be endorsed and transferred, and a holder in due course can enforce it largely free from most defences the maker might raise against the original payee.
Although simple, a Canadian promissory note must still respect the rules on interest. Section 4 of the Interest Act, R.S.C. 1985, c. I-15 limits recovery to 5% per annum unless the rate is expressed as a per-annum equivalent, and section 347 of the Criminal Code caps effective annual interest, fees and charges at 60% per annum. Getting these disclosures right turns a handshake IOU into a document a small claims or superior court will enforce without drama.
What's Covered in This Template
Our promissory note template gives you a tight, negotiable-instrument-compliant document that any Canadian court will recognise.
Maker and Payee
Full legal names and Canadian addresses of the party promising to pay and the party entitled to be paid.
Principal Amount
Clear statement of the sum payable in Canadian dollars, written in both numbers and words.
Unconditional Promise
Unconditional language (“I promise to pay…”) required by section 176 of the Bills of Exchange Act.
Interest Rate
Interest expressed as an annual percentage rate to comply with section 4 of the Interest Act.
Payment Schedule
Single payment on demand, a fixed maturity date or a schedule of instalments.
Place of Payment
Location where payment is to be made — typically the payee’s address or a specified bank account.
Default Clause
Acceleration of the remaining balance if any scheduled payment is missed.
Late Charges or Default Interest
Optional additional interest or fees that respect the Criminal Code section 347 ceiling.
Co-Signers or Endorsers
Optional signatures of endorsers or guarantors who become jointly liable on default.
Governing Law
Confirmation that the note is governed by the laws of the relevant province and Canada.
How to Create a Promissory Note
Follow these steps to produce a clear, enforceable Canadian promissory note.
- 1
Confirm the Structure
Decide whether the note is payable on demand, at a fixed date, or in instalments.
- 2
Enter Maker and Payee Details
Add full legal names and addresses, plus any endorsers or co-signers.
- 3
Set the Financial Terms
Specify the principal amount, the annual interest rate and the payment schedule.
- 4
Add Default and Late-Payment Terms
Describe what happens if the maker misses a payment and any default interest or charges.
- 5
Sign and Store Safely
The maker signs and dates the note; the payee keeps the signed original in a secure location.
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Legal Considerations
Promissory notes are short but highly technical documents, and Canadian courts treat their wording literally.
This template is for informational purposes only and does not constitute legal advice. Consult a qualified lawyer in your province for advice specific to your situation.
Reviewed for Canadian law
The Bills of Exchange Act
Section 176 of the Bills of Exchange Act, R.S.C. 1985, c. B-4 defines a promissory note as an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand or at a fixed or determinable future time a sum certain in money. Failing any of these elements — for example, making payment contingent on a future event — turns the document into something other than a negotiable instrument, reducing its enforceability on transfer.
Interest Act and Criminal Code Limits
Section 4 of the Interest Act, R.S.C. 1985, c. I-15 requires interest to be expressed as a per-annum rate; otherwise recovery is capped at 5%. Section 347 of the Criminal Code, R.S.C. 1985, c. C-46 makes it an offence to enter into or receive payment of interest at an effective annual rate of more than 60%, taking into account fees and charges. Clean, per-annum rate disclosure is the single most important drafting step.
Holder in Due Course and Endorsement
A promissory note can be transferred by endorsement and delivery. A holder in due course — someone who takes a complete and regular note for value, in good faith and without notice of defects — takes the note free from most defences the maker might have against the original payee (section 55, Bills of Exchange Act). This is why promissory notes are often preferred by commercial lenders.
Limitation Periods
Claims on a promissory note are subject to the two-year basic limitation period under statutes like the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B in Ontario and the Limitation Act, S.B.C. 2012, c. 13 in British Columbia. For demand notes the clock typically runs from the day demand is made. A signed written acknowledgement of the debt or a partial payment can restart the limitation period.
Frequently Asked Questions
Create Your Promissory Note Now
Turn a verbal IOU into a clean, enforceable Canadian promissory note. Fill in the principal, interest and payment terms, preview the note and download a PDF ready for the maker to sign.
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